Today in the lower house of the Irish parliament, Minister for Finance Brian Lenihan repeated a statement that he made on Irish radio yesterday concerning European endorsement of the Irish government’s policies in relation to the banking crisis.Â Specifically, he told the house —
The fact is that every finance minister in Europe [Eurozone] indicated the other evening that the [blanket bank liability]Â guarantee was the correct policy at the time [September 2008].
The basis is this paragraph from the Eurogroup statement following their Monday meeeting
We welcome the measures taken to date by Ireland to deal with issues in its banking sector, via guarantees, recapitalisation and asset segregation. These measures have helped to support the Irish banking sector at a time of great dislocation. However, market conditions have not normalised and pressures remain, giving rise to concerns that further reforms and stabilisation measures may be appropriate.
Since this statement is like all such statements written to be vague enough to encompass what all the parties want it to mean, it’s worth being more specific.Â So: do the finance ministers support a policy of open-ended liability guarantees to insolvent banks regardless of their size?Â Because that’s what Ireland did in 2008.Â And the minister is now using the claimed endorsement of his European colleagues as a basis for being angry at the opposition for even having forced a vote on the extension of the revamped guarantee yesterday.